United-Continental Merger: Will Regulators Approve? They Should

Last Updated May 4, 2010 6:30 AM EDT

It's official. United (UAUA) and Continental (CAL) will be merging to form the largest airline in the world. There are plenty of things that can cause problems along the way from labor integration to tech issues, but there's really one big issue that would be most likely to kill the deal. The regulators. This merger will require Department of Justice (DOJ) approval to make sure it's not anticompetitive. Will it pass? It should.

Internationally, there is no question that this will be approved. The feds have already approved a joint venture which would allow cooperation for international routes, so this would have no competitive impact at all. It's just a domestic issue.

The remarkable thing about a United/Continental merger is that there is shockingly little overlap. In fact, there are only 14 routes that they both fly individually, all of them domestic. Here's the list:

Route Competition
Chicago/O'Hare - Cleveland American
Chicago/O'Hare - Houston/Intercontinental American
Chicago/O'Hare - Newark American
Denver - Cleveland None
Denver - Houston/Intercontinental Frontier
Denver - Newark None
Los Angeles - Honolulu American, Delta, Hawaiian
Los Angeles - Houston/Intercontinental None
Los Angeles - Kahului (Maui) American, Delta
San Francisco - Houston/Intercontinental None
San Francisco - Newark None
Washington/Dulles - Cleveland None
Washington/Dulles - Houston/Intercontinental None
Washington/Dulles - Newark None
As you can see, this leaves eight routes going from two carriers to one. If you include flights to places like Houston/Hobby, New York/LaGuardia and JFK, Oakland, and Akron/Canton (which is a stretch), then the list shrinks further. But let's be honest, even without including those airports, the impact is incredibly minimal.

In short, if Delta and Northwest can get approved, so should this. But that doesn't mean it'll be easy. Delta and Northwest obtained approval under a different regime. The Department of Justice has been fighting the airlines tooth and nail lately, even when it doesn't make sense. For example, the proposed slot swap between US Airways and Delta received sharp criticism from DOJ even though it should have good benefits for the consumer.

In the end, my guess is this will go through, as it should, but it wouldn't surprise me if it's not as easy as it should be.